Released: May 11, 2008

Muni bonds: Uninsured doesn’t mean unsafe

Source: Jane Bryant Quinn [Washington Post] (Free Registration)

Now you know. You’ve been wasting your money by buying insured municipal bonds. The bonds themselves are fine. In fact, muni yields are practically irresistible today, for taxable accounts. The wasteful part is the insurance. You don’t need it and never did. The bonds themselves are better, safer credits than the expensive insurance wrapped around them.

Municipal bond insurance provides investors with a guarantee. If the issuer defaults, the insurer will cover the interest and principal payments as they come due. This form of comfort comes at a price. Bonds from sound insurers yield about 0.2 to 0.3 percent less than similar bonds that are uninsured, said Jerry Webman, chief economist for OppenheimerFunds in New York.

Read Full Article: Muni bonds: Uninsured doesn’t mean unsafe